Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd
Upload
55 views

Principles

The document outlines 10 basic accounting principles: 1) Economic Entity Assumption, 2) Monetary Unit Assumption, 3) Time Period Assumption, 4) Cost Principle, 5) Full Disclosure Principle, 6) Going Concern Principle, 7) Matching Principle, 8) Revenue Recognition Principle, 9) Materiality, and 10) Conservatism. These principles provide the framework and guidelines for accountants to systematically record and report financial information.

Uploaded by

edverd_devere
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
55 views

Principles

The document outlines 10 basic accounting principles: 1) Economic Entity Assumption, 2) Monetary Unit Assumption, 3) Time Period Assumption, 4) Cost Principle, 5) Full Disclosure Principle, 6) Going Concern Principle, 7) Matching Principle, 8) Revenue Recognition Principle, 9) Materiality, and 10) Conservatism. These principles provide the framework and guidelines for accountants to systematically record and report financial information.

Uploaded by

edverd_devere
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 1

1. Economic Entity Assumption 2. Monetary Unit Assumption 3. Time Period Assumption 4.

Cost Principle

The accountant keeps all of the business transactions of a sole proprietorship separate from the business owner's personal transactions.

Economic activity is measured in U.S. dollars, and only transactions that can be expressed in U.S. dollars are recorded.

This accounting principle assumes that it is possible to report the complex and ongoing activities of a business in relatively short, distinct time intervals.

From an accountant's point of view, the term "cost" refers to the amount spent (cash or the cash equivalent) when an item was originally obtained, whether that purchase happened last year or thirty years ago. For this reason, the amounts shown on financial statements are referred to as historical cost amounts.

5. Full Disclosure Principle

If certain information is important to an investor or lender using the financial statements, that information should be disclosed within the statement or in the notes to the statement. It is because of this basic accounting principle that numerous pages of "footnotes" are often attached to financial statements.

6. Going Concern Principle

This accounting principle assumes that a company will continue to exist long enough to carry out its objectives and commitments and will not liquidate in the foreseeable future.

7. Matching Principle 8. Revenue Recognition Principle

. The matching principle requires that expenses be matched with revenues.

Under the accrual basis of accounting revenues are recognized as soon as a product has been sold or a service has been performed, regardless of when the money is actually received.

9. Materiality

Because of this basic accounting principle or guideline, an accountant might be allowed to violate another accounting principle if an amount is insignificant. Professional judgement is needed to decide whether an amount is insignificant or immaterial.

10. Conservatism

If a situation arises where there are two acceptable alternatives for reporting an item, conservatism directs the accountant to choose the alternative that will result in less net income and/or less asset amount.

You might also like